LONDON (Reuters Health) - Chancellor Gordon Brown announced on Wednesday that the National Health Service budget will rise by 43% over the next five years as Britain tries to catch up with health spending in the rest of Europe.

Delivering his budget speech, he told the Commons: "This is a budget to make our NHS the best health insurance policy in the world."

Brown stressed that he was not signing a blank cheque and that the extra money would be tied to health modernisation, and new financial incentives to ensure hospital results.

To help fund higher health spending, he said that from April next year there will be an additional one percent on National Insurance contribution from employers and employees and the self-employed on all earnings above £4,615.

The announcement follows publication earlier in the day of a report commissioned by Brown that says spending on health must increase from 7.7% of national income now to as much as 12.5% in 20 years time to reverse the "history of underinvestment" that has left the NHS unable to cope.

"We need to devote a significantly larger share of our national income to healthcare," the report's author, Derek Wanless, told a news conference.

Even in the most conservative scenario, spending on health must rise sharply to 9.4% of gross domestic product by 2007--equal to £96 billion ($138.6 billion) a year--and to 10.6% of GDP by 2022 if Blair is to make good an election pledge to deliver "world class public services."

British Medical Association chairman Dr. Ian Bogle said the new programme of investment "offers real hope to the people of the United Kingdom who depend on the NHS and to the million people working in it who want the NHS to succeed and want their efforts on behalf of patients to bear fruit.

"We intend to play a full part in the programme of reform but we will continue to tell the full unvarnished truth about where change is needed and where doctors and nurses simply need to be allowed to get on with the job without the distraction of hoops, hurdles and targets."

Earlier he also warned in a statement: "Substantial rewards are needed to retain doctors in the NHS over the next decade when the gap between supply of doctors and the needs of patients will be at its most intense."

Nick Black, professor of health services research at the London School of Hygiene and Tropical Medicine, said money alone would not improve healthcare unless those buying the care stood up to the "bullying" of those providing it.

"If you put the money firmly in the hands of the purchasers and they really start to make decisions and are not just bullied by the providers, then you could start to see some radical changes," he said in a telephone interview.

Black added that there was a risk that without proper controls more money might encourage doctors to perform a greater variety of operations rather than cutting waiting times for existing operations. For example, orthopaedic surgeons might do more knee and elbow replacements rather than concentrating on hip replacements.

He said three-quarters of the extra money recently allocated to health had gone on pay awards for low paid staff. "That helps staff recruitment and retention and boosts morale but it does not translate into more patients treated."

The Institute of Healthcare Management welcomed the budget but also warned that "70% NHS expenditure is on staff and most of those staff are many years in the training. So we must expect a time lag between investment and results."

Royal College of Physicians President Professor Sir George Alberti said that the annual spending increase "means that we now have enough room to be innovative and radically improve the NHS once we get enough doctors, nurses and other staff.

"We strongly welcome the new independent audit and inspection of where the money is spent and hope for as much transparency as possible in this process. The resounding challenge now to all the professions is to make the NHS work and make it work quickly."

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